By George Anderson
An article in the Puget Sound Business Journal (Seattle) opens with an anecdote that defines the Costco consumer and the means to pleasing them.
As the story goes, a shopper in Costco sees a display of name brand designer shirts that sell elsewhere for $60 priced at $37. The customer says, "I'll take four in white and one in blue."
A Sam's Club shopper seeing the very same display would say, "I don't care how good a shirt it is, I'm not spending that much."
Costco has established its niche and expanded it in a soft economy precisely, according to the publication, because of its "focus on delivering quality, name-branded bargains to a still-spending, upscale customer base."
Neil Cherry, retail partner, Bain & Co. said Costco's success is due, in large part, to it being a fun place to shop. "One-quarter of the merchandise is being rotated every week, and people like the treasure-hunt mentality of going to a club store. It's going to a branded-goods garage sale with goods you want to buy."
Richard Galanti, chief financial officer, Costco believes economic conditions over the past several years have worked to his company's advantage. "Manufacturers are more willing to sell to us directly. Just in Levi's, we went from perhaps $10 million or $20 million to $150 million (a year) in Levi's, at a better price to members. We'd like to sell Godiva chocolates and Sony TVs and Estee Lauder and Paul Mitchell."
Moderator's Comment: Will an improving economy make it more or less likely manufacturers will be willing to sell to Costco directly?
In some respects, Costco probably isn't all that concerned. Goods sold at Costco are expected to be of high quality. From all reports, the company's own Kirkland Signature brand has met and in many cases exceeded the high expectations of the warehouse club's discerning customers. [George Anderson - Moderator]